News & Politics

Your Internet Purchases May Become More Expensive

The Supreme Court has agreed to hear a case involving sales tax collection that could dramatically affect the price of goods purchased on the internet.

Associated Press:

The Supreme Court agreed Friday to wade into the issue of sales tax collection on internet purchases in a case that could force consumers to pay more for certain purchases and allow states to recoup what they say is billions in lost revenue annually.

Under previous Supreme Court rulings, when internet retailers don’t have a physical presence in a state, they can’t be forced to collect sales tax on sales into that state. Consumers who purchase from out-of-state retailers are generally supposed to pay the state taxes themselves, but few do. A total of 36 states and the District of Columbia had asked the high court to revisit the issue.

Large brick-and-mortar retailers like Walmart and Target have long bemoaned the fact that they have to collect sales tax on online purchases because they have physical stores nationwide. Meanwhile, smaller online retailers, who don’t have vast networks of stores, don’t have to collect the tax where they don’t have a physical presence.

Internet giant fought for years against collecting sales tax but now does so nationwide, though third-party sellers on its site make their own decisions. But the case before the Supreme Court does directly affect other online retailers, including, home goods company Wayfair and electronics retailer Newegg, who are part of the case the court accepted.

States say the court’s previous rulings have also hurt them. According to one estimate cited by the states in a brief they filed with the high court, they’ll lose out on nearly $34 billion in 2018 if the Supreme Court’s previous rulings stand. The Government Accountability Office, which provides nonpartisan reports to Congress, wrote in a report last year that state and local governments would have been able to gain between $8.5 billion and $13 billion in 2017 if they could require out-of-state sellers to collect tax on sales into the state. All but five states charge a sales tax.

How can 50 states claim that one online retailer in one location owes them taxes ? I don’t care how much in taxes state and local governments are missing out on. That’s hardly the point. And the way tax proponents frame the issue as one of “fairness” is bogus. How fair is it that an online retailer with one office in Kentucky has to pay the state of Oregon taxes because some of their citizens buy a product from the retailer?

The Supreme Court has seen it this way since the 1990s. But the Roberts court has offered many surprises so it’s not beyond a possibility that you’ll be forced to pay taxes whether the online retailer you purchase from is located in your state or not.